(Association Name)

Individual Disability Insurance Association Program(Name)

(Title)

Agenda

I. Importance of Disability Coverage

II. Products Available

III. Benefits to Your Association

IV. Program Guidelines

V. Promotion & Enrollment

VI. Next Steps

I. Importance of DisabilityCoverage

How Important is Individual Disability Insurance

Coverage?

Over their careers, workers are three and a half times more likely to be injured and need disability coverage then they are to die and need life insurance (Source: Health Insurance Association of America, 2000)

What are the Chances?

• A person’s chances of becoming disabled prior to age 65 are higher than most people would expect.

• Chances of a Disability lasting 90 days or longer*

*Commissioners Individual Disability Table B

Who Needs It?

A recent employee survey of Principal Life’s small-to-medium sized business clients, indicated:

• 13% own an individual disability income (DI) insurance policy

• 40% believe they do not have adequate disability protection

• 59% feel very/somewhat unknowledgeable about DI

Successful Financial Strategy

II. Products Available –

Disability Income

What is Disability Income(DI)?

• Cover daily personal expenses such as:

– Mortgage or rent

– Car payment(s)

– Utilities

– Groceries

Disability Income Insurance

• Non-cancelable

• Guaranteed renewable

Definition of Disability

• Important part of any DI policy

• Defines when a person becomes eligible for benefits

Principal Life’s Definition of Disability

• During the Your Occupation Period, the insured is unable to perform the substantial and material duties of his or her occupation and is not working. – After the Your Occupation Period, the

insured must be unable to work in any occupation he or she is reasonably suited to by his or her education, training or experience, and is not working.

Your Occupation Benefit Periods

• Built into base policy

– 2 year

• Available protection for additional premium

– 5 year

– To Age 65

– To Age 67

– To Age 70

Key Policy Riders

• Automatic Increase Option and/or Benefit Update

• Residual Disability Benefit

• Catastrophic Disability Benefit

• Cost of Living Adjustment

• Mental/Nervous Substance Abuse (MNSA) Disorder

Additional Key Riders

• Short Term Residual Disability Benefit

• Recovery Benefit

• Extended Total Disability Benefit

• Regular Occupation

Products Available – Overhead Expense (OE)

and Disability Buy-Out (DBO)

Overhead Expense & Disability Buy-Out

• Chances of Disability Lasting 3 Months or Longer (before age 65)

Age 1 Owner 2 Owners 3 Owners

27 41.9% 66.3% 80.4%

37 38.7% 62.4% 77.0%

47 32.4% 54.4% 69.2%

57 19.6% 35.4% 48.0%

Why Overhead Expense?

• Reimburses a business owner for covered business

• Helps ensure a business can remain open and the owner can either:

– return to a financially sound business; or

– sell a business that has not depreciated because of the owner’s disability.

How Does OE Insurance Work?

The disabled client is reimbursed for expenses paid.

– Premiums are tax deductible. (Rev. Rul. 55-264, 1955-1 C.B. 11)

– Benefits are reportable as income but business expenses are deductibles(Rev. Rul. 55-264, 1955-1 C.B. 11)

Disability Buy-Out (DBO)

• Buy-sell agreement ensures the orderly transfer of a business interest in the event of the business owner’s death or disability.

– Most business owners establish a buy-sell agreement but fail to fund it – or only fund it for an owner’s death.

Why Disability Buy-Out?

• The objective of DBO insurance is to:

– provide a funding solution for the buy-sell agreement in the event disability.

– reimburse money paid for the purchase of a disabled owner’s interest in the business in the event of a long-term disability.

How Does DBO Insurance Work?

• The non-disabled policy owner or the business is reimbursed for the buy-out expense.

• Premiums are non-deductible. (IRC 265; Rev. Rul. 66-262, 1966-2 C.B. 105)

• Benefits are received income tax-free (IRC 104(a)(3); Rev. Rul. 66-262, 1966-2 C.B. 105)

III. Benefits to Your Association

Benefits to Association

• A valuable benefit for existing members at a discount

• An incentive for enticing new members

• No cost to your association

• No administrative work required by your association to enroll members

• Promotional materials and marketing support to promote the program to members

Benefits to Your Association

• 56% of members cite offering life and health insurance benefits as a way to attract new members.

• The most frequently cited reason for sponsoring life and health insurance programs is to lower premium costs for members

• 62% of participants in life and health insurance programs expressed satisfaction in the programs provided by their associations.Source: 2003 American Society of Association Executives Survey

According to the America Society of Association Executives:

Benefit to Members

• 10% discount available.

• Top-quality coverage from a company that provides exceptional customer service

• Free education information and materials

• Financial needs analysis by trained financial representative

• Excellent claims handling and service

IV. Program Guidelines

Program Guidelines - Discounts

• 10% Association discount

• 10% discount if your members are in a select occupation:

– Actuary, Architect, Attorney, CPA, Engineer, Executive & Pharmacist

• 5% to 10% MNSA discount and rider is required (on DI only)*

• Discounts totaling 10% to 30%

* Not available in Texas

Program Guidelines – Issue for DI

• Fully underwritten (Ages 18-60)– Maximum benefits available and all riders

available

• Simplified (Ages 18-50)– $2,500/month maximum benefit

– Limited benefit amount and riders

– Underwriting and medical requirements:

• 48 hour turnaround

• No routine medical requirements or financial verification required

Program Guidelines – Issue for OE and DBO

• Fully underwritten (Ages 18-60)

– Maximum benefits available and all riders available

• Simplified (Ages 18-50)

– $6,000/month Total Benefit

– Underwriting and medical requirements

• Same as for DI, (DBO requires financial verification)

V. Promotion and Enrollment

Promotion & Enrollment

• Pre-Promotion Activities

• Group Activities

• One-on-One Enrollment

• Ongoing Promotion

VI. Next Steps

Next Steps

• Provide endorsement letter

• Develop a 6-12 month marketing

plan

• Provide a membership roster

Policy rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to rider for full details. Riders are subject to state availability. Riders may be subject to an additional charge.

Disability insurance has certain limitations and exclusions. For costs and complete details of coverage, contact your Principal Life financial representative. Disability insurance is issued by Principal Life Insurance Company, Des Moines, IA 50392.

Policy Form Numbers: HH750, HH702, HH703

Rider Form Numbers: HH736, HH704, HH753, HH757, HH758, HH756, HH752, HH759

Thank you.

I look forward to working with you.

Approval #456062006

Strength in numbers

Power of protection